More owner occupiers now own their homes outright, enjoying the benefits of a tax-free asset. Photograph: Edward Staines/ Edward Staines/Loop Images/Corbis

Here’s a question with a slightly surprising answer. In the past decade 620,000 tenants have stopped receiving government subsidy, while another 841,000 and their landlords began to receive support: who are they?

The first group is the one third of council tenants who do not qualify for housing benefit: in 2002, their rents were still subsidised by £300m, but by 2012 this subsidy had gone. The second group is the number of private tenants who now receive housing benefit, who have risen by 135% over the same period.

These figures come from the latest UK Housing Review. When I wrote a similar article based on earlier reports it attracted nearly 100 comments from members and readers of the Guardian Housing Network, many incredulous. So it seems worthwhile revisiting the question I posed then. Who really gets government subsidised housing?

Let’s start with council tenants, where the change since last year is most marked. Councils have been paying significant sums from their rent accounts to the Treasury – payments had grown to almost £500m in 2010-11. Then in April last year, as part of a settlement in which it was decided that the Treasury would no longer take such surpluses, councils paid a lump sum of nearly £8bn. Tenants will have to continue paying through rent for the costs of this extra debt over the next three decades. Tenants who pay all or part of their own rent are therefore helping pay down the national debt.

Of course, it can be argued that council and housing association tenants live in houses that are cheaper because their original building costs were partly met by government grant. But even this advantage is steadily reducing, as already a planned 160,000 homes will have their rents set at close to market levels. And the fact that the remaining debt on social homes averages only £17,000 speaks for itself: most of the original cost has been paid off and current debt often relates to recent modernisations.

It is more difficult than before to call this sector “subsidised”. Looked at another way, social landlords are saving the government vast sums in housing benefit. If all tenants on benefit were suddenly to move to the private rented sector, the government would have to spend an extra £3.6bn per year, because the average benefit payment to private landlords is £30 per week higher. The total subsidy to the private sector has now reached £8.6bn, or 40% of the benefit bill. As the review points out, however, although claimant numbers continue to rise, the average payment in the private sector (£109 per week) has started to fall slightly as government measures to control spending on private landlords begin to bite.

The most controversial argument I drew from last year’s review was that owner-occupiers are heavily subsidised as they don’t pay taxes that might logically apply to the sector. These hidden tax reliefs have grown still further in the past year. They are now worth an estimated net £14bn: that is to say, owners collectively save this amount in taxes that are either charged now on other assets (capital gains tax) or used to affect homeowners. While the figure may be academic, its effects aren’t. The favourable tax treatment is a factor in house prices being so high, and in effect is a subsidy to existing owners at the expense of those who want to own but can’t.

That long-standing homeowners are sitting pretty is revealed by another statistic: the numbers of owner-occupiers has fallen, but the fall is accounted for by those who are still paying mortgages. There has been no fall in numbers of outright owners who now enjoy a tax-free asset. While in theory these estates might be charged inheritance tax, in practice more than 90% of owners escape it.

According to Savills, owner-occupied houses with no mortgages are now worth a staggering £1.7tr. Much of this value is surely attributable to their being undertaxed. By comparison, the £1.3bn of direct subsidy that goes from government to new buyers and mortgage payers who get into difficulty is already tiny and has fallen by £200m in the last year.

Two new schemes, FirstBuy and NewBuy, may help some get on the ladder – but so far fewer than 9,000 transactions have been completed.

Disentangling the way government subsidises housing is not easy and it would be wrong to blame any one administration for what has become a complex and tangled web of public funding and policy decisions taken over decades. But it is fair to ask what the range of subsidies and tax exemptions actually achieves.

If the aim is to produce more houses at affordable prices or rents, it’s clearly not working. If the aim is to sustain the wealth of those lucky enough to be outright owners or to rent out their property, perhaps it is.

Original post and comments: Guardian Housing Network

For more on the UK Housing Review and homeownership, see the FT Datablog